Can Thor Industries Drive Up Its Earnings in 2016?

By Markets Fool.com


Image: Thor Industries.

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The market for recreational vehicles has been strong lately, and Thor Industries has found itself in a strong position within the RV industry. Between it and rival Winnebago , Thor has divided up much of the RV market and has a No. 1 or No. 2 position in a wide range of RVs ranging from travel trailers, fifth-wheel trailers, and motorhomes. Coming into its fiscal second-quarter financial report on Monday, Thor investors expect that the company will post solid growth and set the stage for the important spring season to start. Let's take an early look at how things have gone for Thor Industries lately and what to expect from the RV specialist when it reports its latest results.

Stats on Thor Industries

Analyst EPS Estimate

$0.62

Change From Year-Ago EPS

8.8%

Revenue Estimate

$909.95 million

Change From Year-Ago Revenue

6.7%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Thor Industries put its earnings on cruise control?
In recent months, investors have gotten more optimistic in their views on Thor earnings, raising fiscsal second-quarter estimates by a penny per share and boosting their full-year fiscal 2017 projections by about 1%. The stock hasn't done much, however, falling less than 1% since mid-November.

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Thor Industries' fiscal first-quarter results back in November showed solid gains for the company's business. Overall, revenue climbed 12%, pushing net income up an even larger 29%. Motorized RV sales grew at a faster pace than towable RVs, but Thor was able to boost profit margins, and its backlog of orders climbed substantially from year-ago levels. Executive chairman Peter Orthwein warned that year-over-year comparisons going forward will be more difficult, but the company remains optimistic about its long-term prospects.

Perhaps the biggest bullish argument for Thor right now is the fact that fuel prices have fallen to such low levels that it's much cheaper to operate large RVs than in the past. However, consumers have seen enough volatility in fuel prices in recent years that they'll likely still be reluctant to commit to a long-term purchase without assurances that fuel prices will stay low. That's consistent with what Winnebago has seen lately, and neither Thor nor Winnebago seem to be relying on low fuel prices to bolster what are already fairly favorable demographic trends in their favor.

However, Thor will have to work hard to make the most of the opportunity it has. RV sales have indeed risen, but many buyers are sticking to more pedestrian models without some of the high-margin bells and whistles that do Thor the most good in terms of profit. With pre-tax margins that are generally below 10%, Thor will need to get its sales teams to emphasize the value of higher-end options to maximize its profit potential.

In the Thor report, investors should be ready to compare the company's results with the somewhat downbeat financials that Winnebago posted back in December. If Thor can execute where Winnebago failed to get the most out of the market, then Thor could start to come closer in its bid to become the No. 1 player in the industry. Moreover, with some economic tailwinds supporting would-be purchases of motorhomes and other RVs, Thor Industries has an opportunity to grow right now that might never come again.

The article Can Thor Industries Drive Up Its Earnings in 2016? originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Thor Industries and Winnebago Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.